The earliest returns on the 2011 holiday shopping season are in. Black Friday sales were up an impressive 6.6 percent, while foot traffic was up 5.1 percent.
But the news wasn't all positive. One Wal-Mart shopper was pepper-sprayed by a "competitive shopper," while another was Tasered by police. The behavior at Wal-Mart and elsewhere may betray a certain amount of desperation on the part of consumers. In tough economic times, people will do almost anything to get good bargains. But the earlier opening hours, the extreme discounts, and the super-hyped sales signify a problem with the retailing industry — not with America's consuming culture. For in addition to the smells of fragrances, mistletoe, and the occasional burst of pepper spray, the odor you're sniffing in bricks-and-mortar stores this year is the whiff of desperation.
Take a walk with me through the most recent retail sales data, and you'll see what I mean. The headline number looks good. Retail sales in October were a record $397.7 billion, up from September, and up 7.2 percent from October 2010. But some of the biggest and most rapidly growing components of retailing include segments that we don't really think of as shopping. The biggest retail sector is cars and car parts, which account for about 18 percent of the total; they're up 10.1 percent so far this year. Food and beverage stores — i.e. groceries—constitute about 13.2 percent of sales, and they're up 5.6 percent through the first ten months. Gasoline stations alone account for 11.7 percent of total sales, and their sales are up 19 percent so far in 2011, thanks to higher gas prices. Food service and drinking places account for 10.7 percent of total sales.
Yes, some of those big sectors experience big seasonal fluctuations. But when you back those large segments out, you're left with the traditional bricks-and-mortar retailers, the crowd for whom the five-week period at the end of the year means everything: furniture and home furnishing; building materials and garden supplies; clothing and clothing accessories; sporting goods; general merchandise, and miscellaneous store retailers. Together they constitute about 31.5 percent of total sales. But if you look at the first column in the Census release, you'll find that these guys aren't having a great year. Their sales growth lags that of the entire retail sector. Clothing and sporting goods are doing okay, with sales gains of 5.9 percent and 6.1 percent, respectively, through the first ten months of the year. But so far in 2011, sales for the furniture and home furnishing sector are up just 1.2 percent, electronics and appliances stores are up .2 percent, and general merchandise is up just 3.5 percent. Within general merchandise stores, the department store category is actually down .8 percent. Keep in mind that all these numbers don't account for inflation.
These big bricks-and-mortar segments are losing market share within retailing, and it's not just because people are spending more on gas and food due to higher commodity costs. Check out the figure for non-store retailers, which includes catalogue and direct sales, which account for about 8.1 percent of the total retail markets. Through the first ten months of 2011, sales in that format were up 12.8 percent, nearly twice the growth rate of the overall market. Now check out the quarterly e-commerce report, which aggregates data from web sites of all kinds of retailers. In the third quarter, e-commerce came in at $48.2 billion, up 13.7 percent from the third quarter of 2010. Total e-commerce sales for 2011 should come in at about $190 billion, up 32 percent from $144 billion in 2009. In the third quarter of 2011, according to the Census Bureau, e-commerce accounted for 4.6 percent of total retail sales, up from 3.6 percent in the third quarter of 2008.
Clearly, e-commerce sites, which don't raise hackles by staying open on Thanksgiving and in the middle of the night, are taking market share from bricks-and-mortar retailers. The steady erosion of market share, and the increasing competition from the internet explains why retailers are engaging in high-stakes seasonal promotions.
But there's an irony here. The more extreme culture of Thanksgiving weekend physical retailing may draw more shoppers. But it also may turn people away. Some shoppers are turned off and annoyed by the encroachment of consumption into Thanksgiving. Others may be fearful of getting pepper-sprayed by competitive shoppers. The very long list of things I'd rather do than go to a mall on Friday after Thanksgiving includes listening to Josh Groban cover the collected works of Celine Dion. And this Black Friday, while more people went to the malls than in 2010, so too did more people shop online than did in 2010. IBM Benchmark, which tracks 500 retailing websites, said Black Friday online shopping was up 24.3 percent from 2010. For all their efforts, bricks-and-mortar retailers are likely to lose market share again this Christmas shopping season.
Yes, a chunk of the e-commerce flows to the online operations of big physical retailers like Target, Wal-Mart, and Gap. But that's little solace to the executives who run the vast big-box empires of space, which are burdened by high overhead and long-term leases. Each year, it gets harder for them to cover their fixed costs. And while online shoppers are great, the customers who walk in the door can frequently be more profitable — you don't have to provide them with free shipping, and they're more likely to make impulse buys.
I'm in the camp of Peak Mall — I believe that in the future we simply won't need as many stores to sell as many goods. Some classes of products that occupied big physical retail footprints are now distributed digitally — think of all the Border's, Blockbuster, and HMV Record stores that don't exist anymore. Meanwhile, the people who grew up shopping online are now increasingly driving consumption. The upshot: retailers will continue to adopt risky efforts to draw people in — more stores opening on Thanksgiving Day, more extreme door-buster specials. But they'll likely have diminishing returns.
Daniel Gross is economics editor at Yahoo! Finance
Follow him on Twitter @grossdm; email him at email@example.com
His most recent book is Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation